Richtoll Pty Ltd v WW Lawyers (in Liquidation) Pty Ltd (No 3)

HIS HONOUR:

The defendants subsequently made an application for part of those costs to be paid on an indemnity basis. That application was dealt with on the papers and judgment was handed down on 9 May 2016 (Richtoll Pty Ltd v WW Lawyers Pty Ltd (in Liquidation) (No 2) [2016] NSWSC 578). The effect of that judgment was to set aside the costs order made on 19 April 2016 and replace it with the following order:

By motion, filed 23 May 2016, the defendant sought the following orders:

The motion was heard on 18 July 2016. The defendant relied upon an affidavit of Robert Crittenden, sworn 14 July 2016, which set out the dates when invoices were rendered by its lawyers to the defendant and the dates upon which those invoices were paid. The first invoice was dated 23 September 2010 and the last invoice was dated 23 April 2016. The total legal fees paid by the defendant to its lawyers over that period was $332,900.83. A further breakup of the contents of those invoices was annexed to the affidavit. The plaintiffs were represented by counsel but did not place any evidence before the Court.

The defendant relied upon the decisions of Joseph Lahoud & Anor v Victor Lahoud & Ors [2006] NSWSC 126 (Campbell J) at [82] – [83], Drummond and Rosen Pty Limited v Easey & Ors [No 2] [2009] NSWCA 331 (Tobias and Macfarlan JJA and Handley AJA) at [4] and Grace v Grace [No 9] [2014] NSWSC 1239 (Brereton J) at [57] – [72].

The defendant submitted that the relevant section was s 101 of the Civil Procedure Act 2005 (NSW) (CPA) which relevantly provided:

The defendant submitted that the position in relation to ss 101(4) and (5) CPA was appropriately set out by Campbell J and adopted his approach as follows:

The defendant also relied upon the following statement of principle by Macfarlan JA in Drummond and Rosen Pty Ltd v Easey & Ors (No 2) as follows:

The plaintiffs oppose the orders sought in the motion. In doing so they rely upon the following decisions: Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) [2013] NSWCA 211 (Meagher, Barrett and Ward JJA) at [33] – [39] and The Owners – Strata Plan No 61162 v Lipman; The Owners Strata Plan No 61162 v Building Insurer’s Guarantee Corporation [2014] NSWSC 622 (McDougall J) at [253] – [270].

The position of the plaintiffs is succinctly set out in the observations of the Court in Illawarra Hotel Company Pty Ltd as follows:

The plaintiffs submit that in the absence of evidence dealing with the circumstances that caused the proceedings to be protracted in accordance with the statement of principle in Illawarra Hotel at [38], the defendant should not have interest on its costs.

There is a clear conflict of approach between the court in Drummond and Rosen and that in Illawarra Hotel. Although Handley AJA dissented on an aspect of the decision in Drummond and Rosen Pty Ltd, I do not read his judgment as being in conflict with the matter of principle relied upon by Macfarlan and Tobias JJA. Where his Honour dissented was in relation to whether evidence of payment of fees needed to be adduced by the party seeking the order for the payment of interest.

There are some further matters which are of relevance. It is clear that the court in Illawarra Hotel did not have the earlier decision of Drummond and Rosen brought to its attention. It is also clear that the statement by the court in Illawarra Hotel as to the evidence required, was obiter in that the court was not prepared to deal with the question in the absence of any such claim having been made in the court below or in the Court of Appeal.

The conflict between the two decisions has been identified in later decisions of the Court of Appeal, but has not been resolved. There are, however, two subsequent single judge decisions upon which the parties sought to rely which post-date both Court of Appeal decisions. In the first of those, McDougall J regarded himself as bound by Illawarra Hotel and in the absence of evidence as to why proceedings were protracted, was not prepared to make an order for interest. This was despite the fact that were the matter free of authority, he would have followed the approach in Drummond and Rosen.

The most comprehensive analysis of the position following the two apparently conflicting decisions of the Court of Appeal is that of Brereton J in Grace v Grace (No 9). His Honour identified the apparent conflict and sought to resolve it as follows:

On the facts of this case there is an added element. The claim for interest is made not by the plaintiffs but by the defendant. It goes without saying that in adversary litigation, it is the plaintiff which often has greater control over the course of litigation and the speed at which it is likely to proceed. While that is not true in every case, it is apparent from some of the material which emerged in the course of the principal proceedings that it was the plaintiffs rather than the defendant in this case which caused the matter to be so protracted with the joinder and release of various parties to the proceedings from time to time.

I am of the opinion that the approach followed by Brereton J is the correct approach on the current state of authority, and I gratefully adopt his Honour’s reasons as set out above. In those circumstances, there being no sufficient countervailing factors, I propose to make the order sought by the defendant and to order interest on costs.

I make orders in accordance with the orders sought by the defendant in its notice of motion, filed 23 May 2016, and set out at par [3] hereof. I order the plaintiffs to pay the costs of this application and the hearing before me on 18 July 2016.